Dresden Farm Equipment Ltd. v. Minister of National Revenue, (1988) 91 N.R. 325 (FCA)

• Judge: Urie, Stone and MacGuigan, JJ.
• Court: Federal Court of Appeal (Canada)
• Case Date: October 31, 1988
• Jurisdiction: Canada (Federal)
• Citations: (1988), 91 N.R. 325 (FCA)

Dresden Farm Equipment Ltd. v. MNR (1988), 91 N.R. 325 (FCA)

MLB headnote and full text

Her Majesty the Queen (appellant) v. Dresden Farm Equipment Ltd. (respondent)

(A-158-86)

Indexed As: Dresden Farm Equipment Ltd. v. Minister of National Revenue

Federal Court of Appeal

Urie, Stone and MacGuigan, JJ.

October 31, 1988.

Summary:

The Minister of National Revenue ruled that a farm equipment dealer was not eligible for an inventory allowance under s. 20(1)(gg) of the Income Tax Act. The Tax Review Board allowed the dealer's appeal. The Minister appealed.

The Federal Court of Canada, Trial Division, in a judgment reported 2 F.T.R. 92, dismissed the appeal and affirmed that the dealer was entitled to the inventory allowance. The Minister appealed.

The Federal Court of Appeal allowed the appeal and held that the dealer was not entitled to the allowance.

Income Tax - Topic 1145

Income from business or property - Deductions - Inventory allowance - Income Tax Act, S.C. 1970-71-72, c. 63, s. 20(1)(gg) - A farm equipment dealer claimed an inventory allowance on farm equipment held on consignment, which was kept as its stock in trade - The Federal Court of Canada, Trial Division, held that the dealer was entitled to a s. 20(1)(gg) inventory allowance calculated on the value of the machinery, because the dealer acquired many of the attributes of ownership and, in any event, ownership was not required - The Federal Court of Appeal held that the dealer was not entitled to the allowance - The court held that absent ownership the farm equipment did not constitute inventory under s. 248(1) for which a s. 20(1)(gg) allowance could be claimed - Additionally, since the dealer never purchased the equipment there was no "cost amount" for inventory upon which the calculation permitted by s. 20(1)(gg) could be made in computation of the dealer's income from its business.

Income Tax - Topic 8012

Returns, assessments and appeals - Appeals to courts - Appeal by Crown - Costs payable to taxpayer - Section 178(2) of the Income Tax Act provided that on an appeal by the Minister "from a decision of the Tax Court of Canada ... the Federal Court, in delivering judgment disposing of the appeal, shall order the Minister to pay all reasonable and proper costs of the taxpayer in connection therewith" - The Federal Court of Appeal held that s. 178(2) was not limited to appeals from the Tax Court of Canada to the Federal Court of Canada, Trial Division; it also applied to a subsequent appeal to the Federal Court of Appeal.

Cases Noticed:

Shofar Investment Corporation v. Minister of National Revenue (1979), 30 N.R. 60; 79 D.T.C. 5347 (S.C.C.), refd to. [para. 28].

Burrard Yarrows Corporation v. Minister of National Revenue (1986), 5 F.T.R. 101; 86 D.T.C. 6459 (F.C.T.D.), refd to. [para. 31].

The Queen v. Jawl Industries Ltd. (1974), 74 D.T.C. 6133, refd to. [para. 32].

Re Stephanian's Persian Carpets Limited (1980), 34 C.B.R. 33, refd to. [para. 34].

Re Toyerama Limited (1980), 34 C.B.R. 153, refd to. [para. 35].

Re Bristol Yacht Sales Inc. et al. (1984), 51 C.B.R. 279, refd to. [para. 36].

Minister of National Revenue v. Boehringer Ingelheim (Canada) Ltd., 85 D.T.C. 5443 (F.C.T.D.), dist. [para. 47].

Sinnot News Company, Ltd. v. M.N.R., 56 D.T.C. 1042 (S.C.C.), dist. [para. 47].

Seven Limas Coal and Fertility Co. Inc. v. Hewett, et al. (1986), 52 O.R.(2d) 1 (C.A.), dist. [para. 47].

Minister of National Revenue v. Creamer, [1977] 2 F.C. 195, refd to. [para. 58].

Leclerc and Lemay v. Minister of National Revenue (1982), 52 N.R. 60 (F.C.A.), refd to. [para. 59].

Minister of National Revenue v. Sills, [1985] D.T.C. 5096, refd to. [para. 60].

Hodson v. Minister of National Revenue (1987), 82 N.R. 308; 88 D.T.C. 6001 (F.C.A.), refd to. [para. 61].

Statutes Noticed:

Income Tax Act, S.C. 1970-71-72, c. 63, sect. 9(1), sect. 10(1), sect. 10(2), sect. 20(1)(gg) [para. 27]; sect. 178(2) [para. 56]; sect. 248(1) [para. 27].

Authors and Works Noticed:

Colburn (1981-82), 6 Can. Bus. L.J. 69 [para. 46].

Counsel:

Patricia Lee, for the appellant;

James A. Giffen, for the respondent.

Solicitors of Record:

Deputy Attorney General of Canada, Ottawa, Ontario, for the appellant;

Giffen & Partners, London, Ontario, for the respondent.

This appeal was heard on October 4 and 5, 1988, at Toronto, Ontario, before Urie, Stone and MacGuigan, JJ., of the Federal Court of Appeal.

On October 31, 1988, Urie, J., delivered the following judgment for the Court of Appeal.